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Arcadia’s credit insurance 'to be cut'

Credit insurers are reportedly planning to cut cover for Arcadia Group, amid continued tough trading conditions on the high street.

Euler Hermes has written to clients in the past fortnight, The Sunday Times reports, saying that it plans to reduce cover by around half, between the point of manufacture and sale.

In a note sent to suppliers seen by The Sunday Times, Euler Hermes said: “Whilst the group remains profitable and cash-generative, the latest accounts for the year to August 2017 demonstrate a continued decline in revenues and profitability from continuing operations, impacted by [the] challenging trading environment.” 

It added that it had “no knowledge of current financial performance as the group does not share up-to-date management information” and it was “no longer able to retain existing levels of cover” and Taveta Investments, Arcadia’s parent company, had “been advised of the decision to cut cover”.

Taveta experienced a 42% drop in group operating profit before goodwill, amortisation and exceptional items, to £124.1m for the year to 26 August 2017.

Taveta had an exceptional charge of £29m, as a result of fixed asset impairments, provision for onerous leases and revaluation of investment properties.

Meanwhile, total sales were down 5.6% year on year to £1.9bn.

One source close to the situation said: ”There’s a strong balance sheet at Arcadia with no borrowings at group level. It doesn’t seem to have ruffled too many feathers with suppliers and Arcadia has fairly standard 60-day payment terms.”

One supply source said a decision on whether to reduce cover had not been made yet: “The decision will be made in two weeks. Nothing is certain yet”, he added. 

Arcadia declined to comment.

 

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